THE PRESIDENT: Good morning. I am pleased to be back to the U.S. Chamber.
I want to thank the members of this fine organization for your efforts to
support the spirit of free enterprise, and to advance the interests of
businesses, large and small, across our great country. I'm grateful for
the opportunity to talk to you about a subject that's on all our minds --
and that's the economy.

Bruce, I want to thank you for your leadership and your friendship. I want
to appreciate the other members of the U.S. Chamber leadership group that
is with us. I welcome the entrepreneurs that are with us; fellow citizens.

Our nation is dealing with a serious financial crisis. Over the past
month, Americans have witnessed fast-moving events involving complicated
financial issues. I know many of our citizens are concerned about their
finances. They're worried about the extent of government intervention into
the marketplace. In my conversations with business owners and workers and
families across our country, I've heard the same message: The American
people want a clear explanation of what this crisis means for them, what
the government is doing to fix it, and how this will affect the future of
the free market that makes our economy so dynamic and prosperous. And
that's what I've come to talk about.

To understand how this crisis unfolded you have to look back more than a
decade. For many years, the combination of low interest rates and the
inflow of capital from around the world produced a period of easy credit
here in the United States. This trend was especially apparent in the
booming housing market, where many lenders issued mortgages to borrowers
who could not otherwise afford homes. Many of those loans were then
packaged into complex financial assets, which were sold to banks and
investors all across the world.

These developments came together to set off a chain reaction when the
housing market began to decline. With the supply of homes exceeding the
demand from potential buyers, home values dropped. In addition, many
homeowners with adjustable-rate mortgages saw their interest rates suddenly
reset to higher levels. Both these factors caused a number of borrowers to
default on their mortgages. In turn, many institutions holding assets
related to those mortgages suffered serious losses, which caused some of
them to run short of capital. This led to high-profile bank failures,
restrictions in lending, and widespread anxiety -- all of which contributed
to sharp swings in the stock market.

These developments were most visible on Wall Street, but their impact has
reached far beyond. The drops in the stock market have eroded the value of
Americans' retirement accounts and 401Ks. The tightening of credit has
made it more expensive for many families to borrow money for cars and homes
and college tuition. Many healthy businesses have found it harder to get
loans to expand their operations and to create jobs for our workers.

The federal government has responded to this crisis with systematic and
aggressive measures to protect the financial security of the American
people. People look at this crisis and say, oh, it's only Wall Street. I
don't think so. As a matter of fact, I know that if we had not acted it
could affect the American people directly. The actions will take more time
to have their full impact. It took a while for the credit system to freeze
up; it's going to take a while for the credit system to thaw. These are
decisive measures aimed at the heart of our financial challenges. And
they're big enough and bold enough to work. And the American people can be
confident that they will.

Let me explain this approach piece by piece.

First, the government has focused on preserving the stability of the
overall financial system. For example, out of concern that the failure of
Bear Stearns, Fannie Mae, Freddie Mac, and AIG could collapse our financial
system, the government moved to protect the American people. We prevented
a disorderly failure of these large, interconnected firms -- and we did so
in a way that protects taxpayers and does not shield executives from the
consequences of their irresponsible decisions.

Second, the government has taken unprecedented action to boost liquidity --
the grease that keeps the gears of our financial system turning. The
Federal Reserve has used a variety of tools to inject hundreds of billions
of dollars in new liquidity into the financial system. The Federal Deposit
Insurance Corporation has temporarily guaranteed most new debt issued by
insured banks, which will make it easier for banks to borrow needed money
from each other. The Federal Reserve has announced a new program to
provide support for commercial paper, which is a key source of short-term
financing for American businesses and financial institutions.

Third, the government has provided substantial new protections for
responsible consumers, businesses and investors. The federal government
has temporarily expanded the amount of money insured in bank and credit
union savings accounts, checking accounts, and certificates of deposit from
$100,000 to $250,000. The FDIC has created a new short-term program to
grant unlimited insurance for non-interest-bearing transaction accounts
used by many small businesses. The Treasury has offered temporary
government insurance for money market mutual funds. The Securities and
Exchange Commission is vigorously investigating fraud, manipulation, and
abuse in the markets. With these steps being taken by all these federal
agencies, we're providing greater peace of mind for the American people --
and greater stability for our financial system.

Fourth, the United States is cooperating closely with our partners
overseas, who are also feeling the effects of this global crisis. Last
week, the Federal Reserve and other central banks around the world enacted
a joint cut in interest rates, which will help ease the pressure on credit
markets around the world.

Last weekend, I met with finance ministers from the G7 and G20 -- groups
representing some of the world's largest and fastest-growing economies. On
Wednesday, leaders of the G8 issued a statement underscoring our commitment
to work together to resolve the crisis. The statement calls for a leaders
meeting with a broader group of countries, developed and developing, to
work together to improve the regulatory and institutional structures of our
nations' financial systems.

Earlier this week, leaders in Europe announced steps to purchase equity in
major banks, and provide temporary government guarantees for bank loans.
Tomorrow at Camp David, I'll continue our close consultations by meeting
with President Sarkozy of France and President Barroso of the European
Commission.

Our European partners are taking bold steps. They show the world that
we're determined to overcome this challenge together. And they have the
full support of the United States.

Finally, the government has undertaken an historic effort to address the
underlying problem behind the freeze in the credit markets. Earlier this
month, Congress passed bipartisan legislation authorizing the Treasury
Department to use up to $700 billion to help banks rebuild capital. This
week, I announced that the Treasury will use a portion of that money to
inject capital directly into banks by purchasing equity shares. Large
banks, as well as smaller banks, community banks, and regional banks will
all be able to participate, at their choice. The new capital will help
banks fill the gaps created by losses during the financial crisis, so they
can make loans to businesses and consumers.

In addition, the Treasury will use part of the $700 billion to purchase
some of the troubled assets that are weighing down banks' balance sheets
and clogging the financial system. This extraordinary effort is consistent
with the G7 action plan. It is designed with one overriding purpose -- to
help banks get money flowing, so small businesses can thrive and hire, so
big businesses won't shut down operations. To help the American people is
the goal of this plan.

The actions I just outlined represent an extraordinary response to an
extraordinary crisis. Some of the steps may sound like technical matters,
but they will contribute real benefits to the American people. As they
take effect, they'll help restore stability and confidence in the financial
markets. They'll make it easier for Americans to borrow money for their
cars, and for colleges and basic necessities. They will speed the day when
communities across our nation return to the path of prosperity, job
creation, and long-term economic growth.

I know many Americans have reservations about the government's approach,
especially about allowing the government to hold shares in private banks.
As a strong believer in free markets, I would oppose such measures under
ordinary circumstances. But these are not ordinary circumstances. We took
this measure as a last resort. Had the government not acted, the hole in
our financial system would have grown larger. Families and firms would
have had an even tougher time getting loans, and ultimately the government
would have been forced to respond with even more drastic and costly
measures later on.

Some have viewed this temporary measure as a step toward nationalizing
banks. This is simply not the case. This program is designed with strong
protections to ensure the government's involvement in individual banks is
limited in size, limited in scope, and limited in duration.

The government's involvement is limited in size. The government will only
buy a small percentage of shares in banks that choose to participate, so
that private investors retain majority ownership.

The government's involvement is limited in scope. The government will not
exercise control over any private firm. Federal officers will not have a
seat around your local bank's boardroom table. The shares owned by the
government will have voting rights that can be used only to protect the
taxpayers' investment, not to direct the firm's operations.

The government's involvement is limited in duration. It includes
provisions to encourage banks to buy their shares back from the government
when markets stabilize, and they can raise money from private investors.
This will ensure that banks have an incentive to find private capital to
replace the taxpayers' investment, and to do so quickly.

For those worried about the long-term consequences of the actions, our
history offers some comfort. On several occasions over the past century,
the government has taken partial ownership of private companies in the
banking industry during times of great financial challenge -- most recently
during the savings and loans failures of the 1980s and 1990s. In every
case, the government relinquished its ownership stakes after the crisis
ended. And we will do so again. The government intervention is not a
government takeover -- its purpose is not to weaken the free market; it is
to preserve the free market.

I know many are worried about the price tag of this rescue package. Every
dollar spent will be subject to strong oversight by a bipartisan board. We
will ensure that failed executives do not receive a windfall from
hard-earned taxpayer dollars.

Ultimately, we believe the final cost will be significantly less than the
initial investment. This is true for two reasons. First, many of the
troubled assets that the government buys will increase in value as the
market recovers. That means that the government eventually will be able to
resell them for a higher price. Second, the government will receive
quarterly dividends from the equity shares it purchases in financial
institutions. If banks do not repurchase these shares within five years,
the dividends they owe the government will increase substantially. This
provides a clear incentive for banks to buy back their shares -- thus
returning the money to the taxpayers as soon as possible.

As we work to resolve the current crisis, we must also work to ensure that
this situation never happens again. Above all, that requires updating the
way we regulate America's financial system. Our 21st century global
economy continues to be regulated by laws written in the 20th century.
Secretary Paulson has proposed a detailed blueprint for modernizing these
regulations. Others have put forward good suggestions. Enacting these
ideas into law must be a top priority for the next President and the next
Congress.

Just as importantly, we must guard against unintended consequences. We
must ensure that new regulations aimed at Wall Street do not end up hurting
responsible business owners, limiting the ability of American firms to
raise capital, or putting American workers at a competitive disadvantage.
We must ensure that this crisis does not become an excuse to raise taxes on
hardworking Americans -- which would only make the problem worse. We must
ensure that our efforts to prevent a recurrence of this global crisis do
not lead -- do not lead us to give in to false temptations of economic
isolationism. The best way to demonstrate America's commitment to open
markets is for Congress to approve the Colombia, Panama, and South Korea
free trade agreements this year.

We must also ensure that government officials do not abuse our temporary
position as shareholders in banks. We must not blur the line between the
government and the private sector. We must not supplant the profit motive
with political motives.

We must also never lose sight of the enormous benefits delivered by the
free enterprise system. Despite corrections in the marketplace and
instances of abuse, democratic capitalism remains the greatest system ever
devised. It allows individuals to rise as high in their societies as their
talents and ambition will take them. It rewards hard work, intelligent
risk-taking, and the entrepreneurial spirit. Around the world, free market
policies have lifted millions of people out of poverty, and given them the
opportunity to build a more hopeful life. And here at home, it has given
our large and dynamic economy the flexibility and resilience to absorb
shocks, adjust, and bounce back stronger.

In the long run, the American people have -- can have confidence that this
economy will recover. America is the best place in the world to start and
run a business. America is the most attractive destination for investors
around the globe. America is the home of the most talented and enterprising
and creative workers in the world. We're a country where all people have
the freedom to realize their potential and chase their dreams. This
promise has defined our nation since its founding; this promise will guide
us through the challenges we face today; and this promise will continue to
define our nation for generations to come.